Last Friday (December 27, 2024), Law 15.079 (“Law 15. 079“) was approved by the President of Brazil to establish the Additional Social Contribution on Net Profit (“Additional CSLL“), introducing in Brazil the so-called Qualified Domestic Minimum Top-Up Tax (”QDMTT“), in line with the Pillar 2 initiative of the Organization for Economic Cooperation and Development (”OECD”), which provides for a series of mechanisms to ensure a minimum global standard of taxation of 15% for large multinational groups (Global Rules Against Base Erosion – ‘GloBE Rules’).
The Additional CSLL will apply to multinational groups with consolidated annual revenue of more than 750 million euros in at least two of the last four years (starting from the year tested).
Multinational groups that fall within the scope of the rule must test whether their effective rate of Income Tax and Social Contribution on Net Profit (“IRPJ/CSLL”) for the period, calculated based on the GloBE Rules introduced by the Law, reaches the minimum standard of 15%. Otherwise, the Additional CSLL corresponding to the difference will be due.
The Law provides for certain cases in which the group will be exempt from carrying out the full calculation of the Additional CSLL (safe harbors) and also has also elements for reducing the surcharge due (substance-based exclusion).
According to Law 15.079, the rules will apply from January 01, 2025 onwards, with the first payment to be made in 2026.
The content of the new Law is generally in line with Provisional Measure 1,262 of October 3, 2024 (“MP 1,262”), which proposed the introduction of the same rules.
With the publication of Law 15.079, MP 1,262 lost its purpose and should not be analyzed by Congress. The Brazilian Federal Revenue Service is expected to adapt Normative Instruction 2228 of October 3, 2024, issued in the context of MP 1262, to the new Law.
As this is an increase/new CSLL taxation, the Additional CSLL would, in principle, be subject to the 90-day waiting period rule in order to be effective. However, Law 15.079 does not set this deadline for the tax to take effect, which could lead to disputes between taxpayers and the tax authorities.
The litigation scenario involving the legislation and regulation of the Additional CSLL, however, is complex, since any disputes at the national level could affect the international mechanisms for integrating the Brazilian tax with others created by other jurisdictions.
The application of the Additional CSLL tax involves several challenges and its impact on the tax dynamics of multinational groups tends to be significant, especially in the case of sectors that have significant federal tax benefits. The impact of the additional tax on M&A operations must also be taken into account, since the use for tax purposes of any goodwill created in those operations may be affected by the new rules.
Our Tax practice team is closely monitoring this issue. For clarification on this, or any other points of interest, please contact our professionals.
